[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number: 000-54751

PASSPORT POTASH INC.(Exact name of small business issuer as specified in its charter)

British Columbia, Canada

Not Applicable

(State or other jurisdiction of incorporation or
organization)

(I.R.S. Employer Identification No.)

608  1199 West Pender Street

Vancouver, BC, Canada

V6E 2R1

(Address of principal executive offices)

(Zip Code)

(604) 687-0300Registrants telephone number,
including area code

N/A(Former name, former address and
former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [
] No [X]

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes [X] No [ ]

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer,
accelerated filer, non-accelerated filer, and smaller reporting company in
Rule 12b-2 of the Exchange Act.

This quarterly report on Form 10-Q contains forward-looking
statements that involve risks and uncertainties. Any statements contained herein
that are not statements of historical fact may be deemed to be forward-looking
statements. In some cases, you can identify forward-looking statements by
terminology such as may, will, should, expect, plan, intend,
anticipate, believe, estimate, predict, potential or continue, the
negative of such terms or other comparable terminology. In evaluating these
statements, you should consider various factors, including the assumptions,
risks and uncertainties outlined in our registration statement on Form 10, as
amended, this quarterly report on Form 10-Q, and, from time to time, in other
reports that we file with the Securities and Exchange Commission (the SEC).
These factors or any of them may cause our actual results to differ materially
from any forward-looking statement. Given these uncertainties, readers are
cautioned not to place undue reliance on such forward-looking statements.
Forward-looking statements in this quarterly report include, among others,
statements regarding:

our capital needs;

business plans; and

expectations.

While these forward-looking statements, and any assumptions
upon which they are based, are made in good faith and reflect our current
judgment regarding future events, our actual results will likely vary, sometimes
materially, from any estimates, predictions, projections, assumptions or other
future performance suggested herein. Some of the risks and assumptions include:

our need for additional financing;

our limited operating history;

our history of operating losses;

our exploration activities may not result in commercially exploitable
quantities of potash on our current or any future mineral properties;

the risks inherent in the exploration for minerals such as geologic
formation, weather, accidents, equipment failures and governmental
restrictions;

the competitive environment in which we operate;

changes in governmental regulation and administrative practices;

our dependence on key personnel;

conflicts of interest of our directors and officers;

our ability to fully implement our business plan;

our ability to effectively manage our growth; and

other regulatory, legislative and judicial developments.

We advise the reader that these cautionary remarks expressly
qualify in their entirety all forward-looking statements attributable to us or
persons acting on our behalf. Important factors that you should also consider,
include, but are not limited to, the factors discussed under Risk Factors in
our registration statement on Form 10, as amended, filed with the Securities and
Exchange Commission (the SEC) on September 21, 2012.

The forward-looking statements in this quarterly report are
made as of the date of this quarterly report and we do not intend or undertake
to update any of the forward-looking statements to conform these statements to
actual results, except as required by applicable law, including the securities
laws of the United States.

3

PART I  FINANCIAL INFORMATION

Item 1. Financial Statements

The following unaudited interim consolidated financial
statements of Passport Potash Inc. (sometimes referred to as we, us or our
Company) are included in this quarterly report on Form 10-Q:

It is the opinion of management that the unaudited interim
consolidated financial statements for the six months ended August 31, 2012 and
2011 include all adjustments necessary in order to ensure that the unaudited
interim consolidated financial statements are not misleading. These unaudited
interim financial statements reflect all adjustments which are, in the opinion
of management, necessary to present fairly the financial position, results of
operations and cash flows for the interim periods presented in accordance with
accounting principles generally accepted in the United States of America. Except
where noted, these unaudited interim consolidated financial statements follow
the same accounting policies and methods of their application as our Companys
audited annual financial statements for the year ended February 29, 2012. All
adjustments are of a normal recurring nature. These unaudited interim
consolidated financial statements should be read in conjunction with our
Companys audited annual consolidated financial statements as of and for the
year ended February 29, 2012.

Passport Potash Inc. (the Company) was incorporated on August
11, 1987 under Part 1A of the Quebec Companies Act. On May 4, 2011, the
Company continued its corporate jurisdiction from the province of Quebec to the
province of British Columbia, Canada, effective April 26, 2011. The Company is
engaged in the acquisition and exploration of mineral properties. The Company
has not determined whether its properties contain mineral reserves that are
economically recoverable.

The unaudited consolidated financial statements included herein
have been prepared in accordance with accounting principles generally accepted
in the United States for interim financial information and with the instructions
to Form 10-Q and Regulation S-X. They do not include all information and notes
required by generally accepted accounting principles for complete financial
statements. However, except as disclosed herein, there has been no material
change in the information disclosed in the notes to the financial for the year
ended February 29, 2012. In the opinion of management, all adjustments
(including normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six months ended
August 31, 2012, are not necessarily indicative of the results that may be
expected for any other interim period or the entire year. For further
information, these unaudited consolidated financial statements and the related
notes should be read in conjunction with the Companys audited consolidated
financial statements for the year ended February 29, 2012 included in the
Companys Form 10 registration statement.

The accompanying consolidated financial statements have been
prepared assuming the Company will continue as a going concern. As of August 31,
2012, the Company has not achieved profitable operations and has an accumulated
a deficit. Continuation as a going concern is dependent upon the ability of the
Company to obtain the necessary financing to meet obligations and pay its
liabilities arising from normal business operations when they come due and
ultimately up on its ability to achieve profitable operations. The outcome of
these matters cannot be predicted with any certainty at this time and raise
substantial doubt that the Company will be able to continue as a going concern.
These consolidated financial statements do not include any adjustments to the
amounts and classification of assets and liabilities that may be necessary
should the Company be unable to continue as a going concern. Management intends
to obtain additional funding by borrowing funds from its directors and officers,
issuing promissory notes and/or a private placement of common stock.

NOTE 2  EQUIPMENT

Equipment

Cost

At February 29,
2012

$

34,527

At
August 31, 2012

$

34,527

Depreciation

At February 29, 2012

$

33,483

Charge for the
period

110

At
August 31, 2012

$

33,593

Net book value

At February 29, 2012

$

1,044

At August 31,
2012

$

934

10

Passport Potash Inc.

(An Exploration Stage Company)

Notes to the consolidated financial statements - unaudited

(Expressed in United States dollars)

For the six
months ended August 31, 2012

NOTE 3  UNPROVEN MINERAL PROPERTIES

Holbrook Basin Project

August 31, 2012

Additions

February 29, 2012

Property acquisition costs

Cash
paid for properties

$

1,600,000

$

300,000

$

1,300,000

Balance, ending

$

1,600,000

$

300,000

$

1,300,000

Mineral property option payments and exploration
costs

Costs incurred:

Assay

$

186,620

$

113,301

$

73,319

Drilling and related costs

6,969,835

1,755,426

5,214,409

Geological consulting

1,855,289

542,190

1,313,099

License and filing

136,748

37,345

99,403

Option payments

3,594,564

931,501

2,663,063

Project administration

2,309,256

414,280

1,894,976

Recovery

(112,668

)

(112,668

)

-

Balance, ending

$

14,939,644

$

3,681,375

$

11,258,269

11

Passport Potash Inc.

(An Exploration Stage Company)

Notes to the consolidated financial statements - unaudited

(Expressed in United States dollars)

For the six
months ended August 31, 2012

NOTE 3  UNPROVEN MINERAL PROPERTIES

The Company acquired mineral claims in the Holbrook Basin
Project through the following agreements:

Southwest Exploration Property, Arizona

On September 30, 2008, as amended, the Company entered into an
option agreement to purchase an undivided 100% of certain mining claims located
in the Holbrook Basin region of Arizona, USA, for the following
considerations:

$125,000 ninety days following issuance of a drilling
permit from the Arizona State Land Department (paid);

d)

250,000 shares on April 1, 2009 (issued with a fair value
of $26,988);

e)

2,681,000 shares on October 1, 2009 (issued with a fair
value of $217,064);

f)

5,000,000 shares on November 1, 2010 (issued with a fair
value of $262,274);

g)

$350,000 six months following TSX-V approval of the
issuance of 5,000,000 shares (paid);

h)

Funding of US$200,000 in exploration expenditures
pursuant to the completion of a NI 43-101 technical report
(completed);

i)

250,000 shares upon completion of a NI 43-101 technical
report after drilling (issued with a fair value of $45,595); and

j)

During the year ended February 29, 2012, the Company
purchased the 1% Net Smelter Royalty (NSR) for $1
million.

The Company now has a 100% interest, with no NSR, in the
Southwest Exploration Property.

At August 31, 2012, the Company had a reclamation bond of
$15,000 (February 29, 2012: $15,000) for work done on the Southwest Exploration
Property.

Twin Buttes Ranch, Arizona

On August 28, 2009, as amended, the Company entered into a four
year lease with an option to purchase private deeded land within the Holbrook
Basin. Under the terms of the agreement the Company can earn a 100% undivided
interest in the deeded land and sub-surface mineral rights by making lease
payments totaling $500,000 over four years and, upon exercising its option to
purchase, by paying $20,000,000 for the entire Twin Buttes Ranch including all
sub-surface mineral rights except those pertaining to oil and gas, petrified
wood and geothermal resources. There are no royalties associated with the
sub-surface mineral rights.

Details of the payments under the agreement are as follows:

a)

A payment of $50,000 and $10,000 legal costs on or before
November 26, 2009 (paid);

b)

A payment of $25,000 on September 17, 2010
(paid);

c)

A payment of $75,000 on December 1, 2010
(paid);

d)

A payment of $150,000 on August 28, 2011 (paid);
and

e)

A payment of US$200,000 on August 28, 2012
(paid).

Upon exercising its option to purchase the entire Twin Buttes
Ranch, the Company must deliver a certified cheque in the amount of US$1,000,000
on or before 5pm (Arizona time), August 28, 2013 (the option expiry date),
followed by a payment of US$ 19,000,000 within thirty days.

12

Passport Potash Inc.

(An Exploration Stage Company)

Notes to the consolidated financial statements - unaudited

(Expressed in United States dollars)

For the six
months ended August 31, 2012

NOTE 3  UNPROVEN MINERAL PROPERTIES (Contd)

Twin Buttes Ranch, Arizona (contd)

The lease agreement and purchase option will expire on August
28, 2013 or such other time as is mutually acceptable and agreed to in writing
by both parties.

Fitzgerald Ranch, Arizona

On May 7, 2012, the Company entered into an agreement to
acquire the Fitzgerald Ranch which lies directly adjacent to the Twin Buttes
Ranch for $15,000,000.

At August 31, 2012 the Company had paid $475,000 (February 29,
2012: $225,000) as a deposit towards this purchase. The closing of the sale is
to take place on December 18, 2012.

Joint Exploration Agreement  HNZ Potash, LLC
(HNZ)

On July 27, 2012 the Company entered into a Joint Exploration
Agreement in which the Company assigned 50% of their interest in certain
permits, twenty-one permitted parcels, within the Holbrook Basin Project (from
Southwest Exploration Property and Twin Buttes Ranch above) to HNZ. In return,
HNZ reimbursed the Company for 50% of mineral exploration costs previously
incurred on the permits, ($112,668 received during the six months ended August
31, 2012), and the Company will be liable for 50% of the future costs relating
to the permits.

American Potash LLC, Arizona

On November 12, 2010, the Company entered into an option
agreement to acquire 100% of the right, title and interest in five exploration
permits within the Holbrook basin for the following considerations:

a)

500,000 shares of the Company to be issued on the earlier
of December 15, 2010 or within five business days of the TSX-V acceptance
date (issued with a fair value of $130,444);

b)

Three cash payments of $30,000 each within 12, 18, and 24
months of the acceptance date ($30,000 paid during the year ended February
29, 2012 and $60,000 paid during March, 2012); and

c)

All taxes assessed against the property and minimum
exploration work to keep the claims in good
standing.

The Company purchased the 2% NSR during March, 2012 for
$300,000.

Mesa Uranium, Arizona

On August 31, 2010, the Company entered into an agreement to
acquire 100% undivided interest in three exploration permits within the Holbrook
basin for the following considerations:

a)

500,000 shares of the Company upon TSX-V approval (issued
with a fair value of $40,625);

b)

$20,000 within 90 days of the completion of next
financing after the agreement date (paid);

c)

Minimum exploration expenditures of $19,518 in 2010 as
required by the Arizona State Land Department (completed); and

d)

Maximum available assessment work credits or payments in
lieu of the minimum requirements to keep the claims in good
standing.

13

Passport Potash Inc.

(An Exploration Stage Company)

Notes to the consolidated financial statements - unaudited

(Expressed in United States dollars)

For the six
months ended August 31, 2012

NOTE 3  UNPROVEN MINERAL PROPERTIES (Contd)

Mesa Uranium, Arizona (contd)

On completion of all terms above, the Company shall have earned
a 75% interest and title of the permits shall be transferred to the Company
(completed). The Company can purchase the remaining 25% interest by paying
$100,000 cash, share equivalent or work expenditures (completed). The property
is subject to a 2% NSR and the Company can purchase the NSR at the price of
$300,000 for the full 2%. During the year ended February 29, 2012, the Company
purchased the 2% NSR for $300,000.

The Company now has a 100% interest, with no NSR, in the Mesa
property.

Ringbolt Property, Arizona

On March 28, 2011 the Company entered into an option agreement
to acquire 90% undivided legal and beneficial interest in and to the Ringbolt
Property free and clear of all encumbrances in exploration leases for the
following considerations:

a)

$50,000 upon execution of this agreement
(paid);

b)

$250,000 upon TSX-V approval received on May 17, 2011 and
1,000,000 common shares (issued with a fair value of $669,384);

c)

Minimum exploration expenditures within 1 year of TSX-V
approval of $500,000;

d)

On or before the first anniversary of TSX-V approval
$350,000 and 1,400,000 common shares (see below);

e)

Minimum exploration expenditures within first year of
first anniversary of TSX-V approval of $750,000;

f)

$350,000 upon second anniversary of TSX-V approval and
1,600,000 common shares; and

g)

Minimum exploration expenditures within 1 year of
2nd anniversary of TSX-V approval of
$1,000,000.

On completion of all terms above, the Company shall have earned
a 90% interest and title of the permits shall be transferred to the Company.
Upon exercise of the option agreement, the Company shall be deemed to be granted
an option to purchase the remaining 10% interest in the property for the payment
of $5,000,000.

The Company paid a finders fee of $25,825 to a third party in
connection with this option agreement.

The Company became subject to a civil action in the Third
Judicial District court, Salt Lake County, State of Utah in connection with the
Ringbolt Property option agreement. The optionors are seeking payment of
$350,000, 1,400,000 of the Companys shares and $20,716 in expenses related to
the property, alternatively damages of $644,000. The Company did not make the
required payment and did not issue the shares to the optionors as it contends
that the optionors are in default of the option agreement. The Company has
counter claimed for specific performance under the option agreement and has paid
the $350,000 and issued the 1,400,000 shares to the Utah court. The 1,400,000
shares were issued with a fair value of $271,936 (Note 7).

14

Passport Potash Inc.

(An Exploration Stage Company)

Notes to the consolidated financial statements - unaudited

(Expressed in United States dollars)

For the six
months ended August 31, 2012

NOTE 4  RELATED PARTY TRANSACTIONS

Related party balances

The following amounts due to related parties are included in
trade payables and accrued liabilities:

August 31,

February 29,

2012

2012

Companys controlled by Directors of the
Company (i)

$

58,393

$

19,683

Companys
controlled by Directors of the Company (ii)

-

15,812

$

58,393

$

35,495

(i) This amount is unsecured, non-interest bearing and have no
fixed terms of repayment.

(ii) The amount is unsecured, bears a monthly interest rate of
1.5% and had no fixed terms of repayment. The following amounts due from related
parties are included in receivables:

August 31,

February 29,

2012

2012

Companys controlled by Directors of the Company (i)

$

11,356

$

-

(i) These amounts are unsecured, non-interest bearing and have
no fixed terms of repayment.

Related party transactions

The Company incurred the following transactions with directors,
officers and companies that are controlled by directors and officers of the
Company.

Six month period
ended

August 31,

August 31,

2012

2011

Administration

$

15,401

$

-

Consulting

258,177

28,953

Management fees

187,044

90,183

Mineral property
option payments and exploration costs

283,043

-

$

743,665

$

119,136

15

Passport Potash Inc.

(An Exploration Stage Company)

Notes to the consolidated financial statements - unaudited

(Expressed in United States dollars)

For the six
months ended August 31, 2012

NOTE 5  DERIVATIVE LIABILITY

August 31,

February 29,

2012

2012

Balance, beginning

$

6,374,170

$

26,589,856

Fair value of warrants issued

-

3,668,077

Fair value of warrants exercised

(182,284

)

(1,674,607

)

Change in
derivative liability

(4,995,782

)

(22,209,156

)

Balance, ending

$

1,196,104

$

6,374,170

The derivative liability consists of the fair value of share
purchase warrants that were issued in unit private placements that have an
exercise price in a currency (Canadian dollars) other than the functional
currency of the Company. The derivative liability is a non-cash liability and
the Company is not required to expend any cash to settle this liability.

During the period ended August 31, 2012, the Company issued the
following shares:

(a)

During the period ended August 31, 2012, 1,778,156
warrants were exercised at CDN$0.10 per share for proceeds of
$176,976.

(b)

The Company issued 1,650,000 shares pursuant to mineral
property option agreements at fair values ranging from CDN$0.19 to
CDN$0.20 per share for a total fair value of
$317,531.

16

Passport Potash Inc.

(An Exploration Stage Company)

Notes to the consolidated financial statements - unaudited

(Expressed in United States dollars)

For the six
months ended August 31, 2012

NOTE 6  COMMON STOCK (contd)

Stock options

The changes in options during the six month period ended August
31, 2012 are as follows:

Six month period ended

August 31, 2012

Weighted

average

exercise

Number of

price

options

(CDN$)

Options outstanding, February 29, 2012

16,811,892

$

0.31

Options granted

-

-

Options exercised

-

-

Options cancelled

-

-

Options outstanding, August 31, 2012

16,811,892

$

0.31

Options exercisable, August 31, 2012

16,699,392

$

0.32

Details of options outstanding as at August 31, 2012 are as
follows:

Number of

Exercise price

Options

CDN$

Expiry date

150,000

0.10

October 25, 2012

348,750

0.10

November 16, 2015

1,531,500

0.32

January 10, 2016

5,777,000

0.20

February 11, 2016

1,321,500

0.20

March 3, 2016

1,826,000

0.59

June 21, 2016

1,690,500

0.42

September 12, 2016

4,166,642

0.38

January 20, 2017

16,811,892

The options outstanding as at August 31, 2012 have a weighted
average remaining contractual life of 3.77 years (February 29, 2012 - 4.27
years).

17

Passport Potash Inc.

(An Exploration Stage Company)

Notes to the consolidated financial statements - unaudited

(Expressed in United States dollars)

For the six
months ended August 31, 2012

NOTE 6  COMMON STOCK (Contd)

Share purchase warrants

The changes in share purchase warrants during the six month
period ended August 31, 2012 are as follows:

Number of warrants

Balance, February 29, 2012

50,800,333

Issued

-

Exercised

(1,778,156

)

Balance, August
31, 2012

49,022,177

Details of the share purchase warrants outstanding as at August
31, 2012 are as follows:

Number of

Exercise price

warrants

CDN$

Expiry Date

7,924,545

0.10

November 12, 2012

21,027,632

0.20

January 11, 2013

20,070,000

0.35

January 31, 2013

49,022,177

The warrants outstanding as at August 31, 2012 have weighted a
average remaining contractual life of 0.36 years (February 29, 2012 - 0.84
years).

NOTE 7  SUBSEQUENT EVENT

Subsequent to August 31, 2012, the Utah Court granted the
Companys Motion for Preliminary Injunction. The Company has deposited a bond in
the amount of $350,000 with the Court as security for the preliminary injunction
the Court will issue in favor of the Company (Note 3).

18

Item 2. Managements Discussion and
Analysis of Financial Conditions and Results of Operations

The following discussion of our financial condition, changes in
financial condition and results of operations for the three and six months ended
August 31, 2012 and 2011 should be read in conjunction with our unaudited
interim consolidated financial statements and related notes for the three and
six months ended August 31, 2012 and 2011. The following discussion contains
forward-looking statements that involve risks, uncertainties and assumptions.
Our actual results may differ materially from those anticipated in these
forward-looking statements as a result of many factors, including, but not
limited to, those set forth under the section entitled Risk Factors in our
registration statement on Form 10, as amended, filed with the Securities and
Exchange Commission (the SEC) on September 21, 2012.

Certain information and footnote disclosures normally included
in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted. It is suggested that these financial statements be read in conjunction
with the financial statements and notes thereto included in the Companys
February 29, 2012 audited financial statements, which were attached to our
registration statement on Form 10, as amended, filed with the SEC on September
21, 2012. The results of operations for the periods ended August 31, 2012 and
the same period last year are not necessarily indicative of the operating
results for the full years.

Overview of our Business

We were incorporated on July 31, 1987 under the laws of Québec,
Canadaunder the name Bakertalc Inc. On January 21, 1994, we changed
our name to Palace Explorations Inc. On November 11, 1996, we changed our name
to X-Chequer Resources Inc. On September 29, 2004 we changed our name to
International X-Chequer Resources Inc. On October 18, 2007, we changed our
name to Passport Metals Inc. On November 10, 2009 we changed our name to
Passport Potash Inc. Effective April 26, 2011, we continued our governing
corporate jurisdiction from the Province of Québec to the Province of British
Columbia under the name Passport Potash Inc. We are an exploration stage
company engaged in the acquisition, exploration and development of mineral
resource properties. We currently have an interest in or have the right to earn
an interest in six properties: Southwest Exploration Property, Twin Buttes
Ranch, Sweetwater/American Potash, Mesa Uranium, Ringbolt Property and
Fitzgerald Ranch (the Holbrook Basin properties), which are all located in
Arizona. We have not established any proven or probable reserves on our mineral
property interests and we are not in actual development or production of any
mineral deposit at this time. We are an exploration stage enterprise, as defined
in FASB ASC 915 Development Stage Entities.

Our principal focus is our Holbrook Basin potash project
comprised of exploration permits and claims, some of which we hold directly and
others which are subject to option, a lease over with an option to purchase the
Twin Buttes Ranch property, and a purchase agreement for the Fitzgerald Ranch
property. Our interest in our Holbrook Basin project is comprised of 53 Arizona
State Land Department exploration permits, the Twin Buttes Ranch lease and
option, the purchase agreement for the Fitzgerald Ranch property, and the option
to purchase the Ringbolt exploration permits (an additional 25 ASLD permits).

Subsidiaries

We have one wholly owned subsidiary, PPI Holding Corporation,
an Arizona corporation.

Mineral Properties/Agreements

Southwest Exploration Property

On September 30, 2008 we entered into a mineral property option
agreement (the Southwest Option Agreement) with Southwest Exploration
Inc. (Southwest) to acquire an undivided 100% interest in 13Arizona
State Land Department exploration permits (ASLD Exploration Permits)
comprising 8,413.3 acres ( 3,404.76 ha) of mineral exploration property located
in Navajo County, in the Holbrook Basin, Arizona. Under the terms of the Southwest
Option Agreement, any after acquired permits within the area of common interest
may be made part of the property. Pursuant to this clause, 32 additional ASLD
Exploration Permits were made part of the property for a total of 45 ASLD Exploration
Permits.

Under the terms of the Southwest Option Agreement, as amended,
we could acquire a 100% interest in the Southwest mining claims, subject to a 1%
NSR retained by Southwest, in exchange for the following considerations:

(a)

$100,000 (paid) on execution of the agreement;

(b)

1,000,000 options (issued) upon receipt of TSX-V approval
of the agreement;

19

(c)

$125,000 from 90 days following issuance of a drilling
permit from the Arizona State Land Department. This permit was received on
June 11, 2009 and $125,000 was paid July 23, 2009;

(d)

250,000 shares on April 1, 2009 (issued);

(e)

2,681,000 shares on October 1, 2009 (issued);

(f)

5,000,000 shares on November 1, 2010 (issued);

(g)

$350,000 from six months following TSX-V approval of the
issuance of 5,000,000 shares (paid);

(h)

Funding of $200,000 in exploration expenditures pursuant
to the completion of a NI 43-101 technical report (completed);

(i)

250,000 shares upon completion of a NI 43-101 technical
report after drilling (issued); and

(j)

Southwest shall retain a 1% NSR (purchased by the
Company).

If and when the option is exercised, the 100% right, title, and
interest in and to the property will vest in us free and clear of all charges,
encumbrances and claims, except for the NSR.

Currently, we have a blanket bond with the Arizona State Land
Department in the amount of $15,000 for the ASLD Exploration Permits. In
addition, we also have a bond with the Arizona Oil and Gas Conservation
Commission in the amount of $55,000 for drilling permits.

We entered into an amendment to the Southwest Option Agreement,
dated September 18, 2009, whereby the parties agreed to settle the October 1,
2009 scheduled cash payment of $225,000 with the issuance of 2,681,000 shares
of the Company.

We entered into a second amendment to the Southwest Option Agreement,
dated April 1, 2010, whereby the parties agreed to extend the due date for the
payment of $250,000 to Southwest until October 1, 2010. As we had not satisfied
this payment obligation by October 1, 2010, we issued 5,000,000 shares of our
common stock to Southwest on November 8, 2010 in full satisfaction of the outstanding
payment.

We completed the exercise of our option to purchase the 100%
interest in the Southwest claims and the purchase of the 1% net smelter royalty
in an agreement dated February 13, 2012. The Southwest permits are held by PPI
Holding Corporation, our wholly owned Arizona subsidiary.

Twin Buttes Ranch Property

On August 28, 2009 we entered into a four-year lease with an
option to purchase (the Lease & Option Agreement) with Twin Buttes Ranch,
LLC respecting the Twin Buttes Ranch located in the potash-bearing Holbrook
Basin of east-central Arizona. The Twin Buttes Ranch comprises some 28,526 acres
(11,544 hectares) of private deeded land with 76.7% or approximately 21,894
acres (8,860 hectares) overlying the potash horizons within the Holbrook Basin.

Under the terms of the Lease & Option Agreement, we may acquire
a 100% undivided interest in the deeded land and sub-surface mineral rights
comprising the Twin Buttes Ranch property by making lease payments totaling
$500,000 over a four year period and, upon exercising our option to purchase,
by paying $20,000,000 for the entire Twin Buttes Ranch including all sub-surface
mineral rights except those pertaining to oil and gas, petrified wood and geothermal
resources. There are no royalties associated with the sub-surface mineral rights.

On September 30, 2010 we announced that we had amended the
terms of the Lease & Option Agreement to provide for an extension of a
portion of the initial cash payment until December 1, 2010.

Details of the payments under the Lease & Option Agreement
are as follows:

(a)

A payment of $50,000 and $10,000 legal costs on or before
November 26, 2009 (paid);

(b)

A payment of $25,000 on September 17, 2010
(paid);

(c)

A payment of $75,000 on December 1, 2010
(paid);

(d)

A payment of $150,000 on August 28, 2011
(paid);

(e)

A payment of $200,000 on August 28, 2012 (paid);
and

(f)

Upon exercising its option to purchase the entire Twin
Butte Ranch, the Company must deliver a certified cheque in the amount of
$1,000,000 on or before 5pm (Arizona time), August 28, 2013 (the option
expiry date), followed by a payment of $ 19,000,000 within thirty
days.

20

The Lease & Option Agreement will expire on August 28,
2013, or such other time mutually agreed to in writing by the parties. All
payments to date have been made and the option is in good standing.

Sweetwater/American Potash Property

On November 12, 2010 we entered into an option of Arizona
exploration leases (the Sweetwater Option Agreement) with Sweetwater River
Resources, LLC (Sweetwater) and American Potash, LLC (American Potash) to
acquire the right, title and interest in five mineral exploration permits within
the Holbrook Basin. The five permits consist of Arizona State Land Department
exploration permits that cover more than 3,200 acres.

Pursuant to the terms of the Sweetwater Option Agreement, we
could acquire a 100% interest in the exploration permits for the consideration
of: (i) issuing 500,000 shares of our common stock by December 15, 2010; (ii)
cash payment of CAD$90,000 payable in three installments of $30,000 each at 12
months, 18 months and 24 months from the date of signing the Sweetwater Option
Agreement; and (iii) meeting the exploration expenditures a required by the
Arizona State Land Department. We are responsible for payment of all exploration
expenditures on the permits. Pursuant to the Sweetwater Option Agreement, the
property was subject to a 2% net smelter royalty in favor of American Potash
which we had the option to purchase at a price of $150,000 for 1% or $300,000
for the full 2%.

On March 27, 2012, we completed the exercise of the option
under the Sweetwater Option Agreement and the repurchase of the 2% NSR royalty
in respect of the Sweetwater exploration permits. The permits are held by PPI
Holding Corporation, our wholly owned subsidiary.

Mesa Uranium Property

On August 31, 2010 we entered into a mineral property option
agreement (the Mesa Option Agreement) with Mesa Uranium Corp. (Mesa) in
respect of three Arizona State Land Department exploration permits covering
approximately 1,950 acres, which are wholly owned by Mesa. Pursuant to the terms
of the agreement, we had the right to acquire a 75% interest in the Mesa permits
in consideration for the issuance of 500,000 shares of our common stock to Mesa,
the payment of $20,000.00 cash to Mesa and meeting the minimum exploration
expenditures as required by the Arizona State Land Department. Upon earning a
75% interest in the permits, we had the right to acquire the remaining 25%
interest in the Mesa permits by paying $100,000 in cash, stock equivalent or
work expenditures. Under the terms of the agreement, we are responsible for
payment of all exploration expenditures on the leases. The property was subject
to a 2% net smelter royalty which we had the option to purchase at a price of
$150,000 per 1% or $300,000 for the full 2%.

On February 13, 2012, we exercised our option to acquire a 75%
interest in the Mesa permits. On March 9, 2012, we announced that we had
exercised our option to acquire the remaining 25% interest in the Mesa
properties under the Mesa Option Agreement and to acquire the 2% NSR on those
properties thereby acquiring a royalty-free, 100% interest in the Mesa
properties. The permits are held by PPI Holding Corporation, our wholly owned
subsidiary.

Ringbolt Property

On March 28, 2011 we entered into an option agreement (the
Ringbolt Option Agreement) with Ringbolt Ventures Ltd., Potash Green, LLC,
Wendy Walker Tibbetts and Joseph J. Hansen pursuant to which we acquired the
right to acquire a 100% interest in the Ringbolt potash property located in the
Holbrook Basin of southeast Arizona. The Ringbolt property is comprised of
15,994.32 acres of mineral exploration permits on land managed by the Arizona
State Land Department.

Pursuant to the terms of the Ringbolt Option Agreement, we may
acquire a 90% interest in the property by: (i) making cash payments totaling
$1.0 million ($50,000 upon execution of the agreement, $250,000 upon TSX Venture
Exchange approval, $350,000 on or before the 1st anniversary of TSX
Venture Exchange approval, and $350,000 on or before the 2nd
anniversary of TSX Venture Exchange approval), (ii) incurring a total of $2.25
million in exploration expenditures on the property over three years ($500,000
within 1 year of TSX Venture Exchange approval, $750,000 within 1 year of the
1st anniversary of TSX Venture Exchange approval, and $1,000,000
within 1 year of the 2nd anniversary of TSX Venture Exchange
approval), and (iv) issuing four million common shares over a three-year period
(1,000,000 shares upon TSX Venture Exchange approval, 1,400,000 shares on or
before the 1st anniversary of TSX Venture Exchange approval, and
1,600,000 shares on or before the 2nd anniversary of TSX Venture
Exchange approval). Upon satisfaction of these terms, we will have the right to
purchase the remaining 10% interest for a cash payment of $5 million, which
shall remain exercisable until the Ringbolt property goes into commercial
production (defined as the sale of any mineral products from the property). In
addition, pursuant to the Ringbolt Option Agreement, the Ringbolt property will
be subject to a 1% gross overriding royalty on production from the property.

21

On May 18, 2012, we delivered a letter to North American Potash
Developments Inc. (formerly Ringbolt Ventures Ltd.) and the other optionors
(collectively, the Optionor), informing them that they were in breach of the
Ringbolt Option Agreement and that the payment of cash and shares that were due
on May 17, 2012 would not be paid until Optionor cured the defaults delineated
in the default letter.

On May 25, 2012, we were informed by the Optionor that it had
filed a civil action in Utah seeking specific performance of the Ringbolt Option
Agreement.

On June 19, 2012, we filed an answer and counterclaim to the
Ringbolt civil action and tendered to the Utah court the $350,000 in cash and
the 1,400,000 shares which were due pursuant to the Ringbolt Option Agreement on
May 17, 2012, pending a ruling by the court on the sufficiency of tender. The
court ruled that tender to the court was not sufficient, therefore, the cash and
shares were released to Optionor on July 10, 2012.

On September 10, 2012, we announced that the court had granted
our motion for a preliminary injunction, which enjoined Optionor from
terminating the Ringbolt Option Agreement based upon the grounds alleged by
Optionor. We intend to continue to vigorously defend our rights in the Ringbolt
Option Agreement.

Cooperative Agreement with Hopi Tribe

Portions of our Holbrook Basin potash project in Arizona are
located adjacent to land privately owned by the Hopi Tribe. On March 8, 2011 we
finalized a cooperative agreement with the Hopi Tribe which establishes a
cooperative arrangement between us and the Hopi Tribe and gives us access across
the privately owned Hopi lands to conduct exploration activities while allowing
the Tribe to share in our study results. We are in continuing discussions with
the Hopi Tribe on the project.

Fitzgerald Ranch Property

On August 17, 2011 we entered into a binding letter of intent
with co-trustees of the Fitzgerald Living Trust (the Seller) to acquire real
estate covering a total of 41,000 contiguous acres of royalty-free private land
(the Fitzgerald Ranch) located near Holbrook and adjacent to our Twin Butte
Ranch holdings in the Holbrook Basin. On May 14, 2012, we announced that we have
entered into a purchase agreement (the Agreement) to acquire the Fitzgerald
Ranch in exchange for a total purchase price of $15 million on the following
material terms: (i) $250,000 to be irrevocably released to the Seller upon
execution of the Agreement; (ii) an additional $250,000 to be placed into escrow
and irrevocably released to the Seller on July 1, 2012; (iii) during the term of
the Agreement, we have the right to perform exploration activities on the
property; (iv) a payment of $14.5 million at closing to take place on December
18, 2012; and (v) the final purchase is subject to TSX Venture Exchange
approval.

A provision of the Agreement grants us the right to perform
exploration activities on the property. We have added 8 additional drill holes
to our 2012 drill program which will be drilled on the Fitzgerald Ranch.

Joint Exploration Agreement with HNZ Potash, LLC

On July 27, 2012, we entered into a Joint Exploration Agreement
(the Agreement) with HNZ Potash, LLC (HNZ) to jointly explore and
potentially develop twenty-one permitted parcels in which we hold ASLD
exploration permits and which are located on the southernmost area of our
landholdings (the Permit Property). The Permit Property is within HNZs
private landholdings and has not been previously explored by us. Under the terms
of the Agreement, HNZ has agreed to pay us 50% of certain costs previously
incurred by us with respect to the Permit Property, and we will assign a 50%
interest in the Permit Property to HNZ.

The purposes of the Agreement are to: (i) conduct exploration
and to evaluate the potential for development and mining of the Permit Property;
(ii) to acquire interests within the lands owned by the Hopi Tribe commonly
referred to as the Dobell Ranch lands as more particularly described in the
Agreement; (iii) if justified by the exploration activities, the parties upon
mutual agreement will form an entity to seek a mining lease to jointly engage in
development and mining of the Permit Property; (iv) to complete and satisfy all
environmental compliance obligations and continuing obligations affecting the
Permit Property; and (v) to perform any other activity necessary, appropriate,
or incidental to any of the foregoing. During the term of the Agreement, the
parties will equally share the costs for maintaining the Permit Property in good
standing with the ASLD. The parties may, either alone or jointly, conduct
exploration of any or all of the Permit Property pursuant to one or more plans
of exploration.

The term of the Agreement shall begin on the effective date of
the Agreement and extend to the expiration of the fifth year term of the last
permit covered by the Agreement, or any permit obtained as a replacement
therefor (the Term); provided, however, that, if during the Term the
participants (or any entity formed by the participants) jointly apply for a
mineral lease or mineral leases on any portion of the Permit Property, the Term shall be
automatically extended to the date a final determination is issued by the ASLD
regarding the last mineral lease application.

22

Other provisions in the Agreement include the following:

The parties will provide to each other existing exploration data from their
Holbrook Basin potash exploration activities. The data provided by each Party
may be used by the other party to update their existing or future resource
reports or any other future reports.

The parties will provide each other vehicular access across existing pave
and unpaved roads on property controlled by the other party.

The parties have established an area of mutual interest and have agreed to
jointly pursue opportunities within this area.

The foregoing description of the Joint Exploration Agreement
does not purport to be complete and is qualified in its entirety by reference to
the Joint Exploration Agreement, which is attached hereto as Exhibit 10.12, and
is incorporated herein by reference.

Employees

As at August 31, 2012, we do not have any employees, however,
we have 10 individuals working on a consulting basis. Our operations are managed
by our officers with input from our directors. We engage geological and
engineering consultants from time to time as required to assist in evaluating
our property interests and recommending and conducting work programs.

Results of Operations

The following table sets forth our results of operations from
inception of exploration stage on May 22, 2007 to August 31, 2012 as well as for
the three and six month periods ended August 31, 2012 and 2011:

May 22, 2007

(inception of

Three month periods ended

Six month periods ended

Exploration Stage)

August 31,

August 31,

August 31,

August 31,

to August 31,

2012

2011

2012

2011

2012

Operating Expenses:

Administration

$

21,591

$

54,925

$

26,092

$

54,925

$

867,596

Advertising

134,987

172,724

345,944

357,359

1,510,324

Business development

113,119

68,688

306,348

105,122

717,715

Consulting fees

135,590

588,677

313,858

1,014,738

7,574,464

Depreciation

55

71

110

142

2,107

Foreign exchange (gain) loss

(161,934

)

87,965

143,947

59,657

101,659

Investor relations

67,399

157,149

188,671

547,482

1,167,424

Management fees

166,043

48,863

337,044

451,110

2,950,381

Mineral property impairment

-

-

-

-

652,784

Mineral property option payments and
exploration costs

2,558,018

2,101,148

3,794,043

4,970,050

15,052,312

Office and miscellaneous

17,720

9,258

34,971

17,957

222,515

Professional fees

262,774

66,682

336,499

88,610

893,909

Property investigation costs

-

-

-

-

24,483

Transfer
agent and filing fees

16,855

26,695

19,298

47,329

302,500

Net loss before other items

(3,332,217

)

(3,382,845

)

(5,846,825

)

(7,714,481

)

(32,040,173

)

Other Items

Change in derivative liability

1,749,229

4,094,898

4,995,782

12,160,684

5,557,132

Interest income

10,334

-

24,528

-

87,025

Loss on debt settlement

-

-

-

-

(37,488

)

Mineral property - recovery

112,668

-

112,668

-

112,668

Other Income

-

-

-

-

153,125

23

1,872,231

4,094,898

5,132,978

12,160,684

5,872,462

Net profit (loss)

$

(1,459,986

)

$

712,053

$

(713,847

)

$

4,446,203

$

(26,167,711

)

Earnings (Loss) per share - basic

$

0.01

$

0.00

$

0.00

$

0.04

Earnings per share - dilutive

$

-

$

0.01

$

-

$

0.04

Weighted average number of shares

Outstanding during the year - basic

172,118,709

124,071,250

170,721,208

124,285,681

Weighted average number of shares

Outstanding during the year -dilutive

-

125,460,598

-

124,980,355

Results of Operations for the three month periods ended
August 31, 2012 and 2011

Revenues

During the three month periods ended August 31, 2012 and 2011,
we did not generate any revenues.

Operating Expenses

Operating expenses incurred during the three month period ended
August 31, 2012 were 3,332,217 as compared to $3,382,845 during the three month
period ended August 31, 2011. Significant changes and expenditures are outlined
as follows:

Administration expenses were $21,591 and $54,925 for the three month
periods ended August 31, 2012 and 2011, respectively. The decrease in
administration expenses was mainly due to the Company not paying any stock
based compensation for administration during the three month period ended
August 31, 2012 as compared to $54,925 stock based compensation issued for
administration during the three month period ended August 31, 2011.

Advertising expenses were $134,987 and $172,724 for the three month periods
ended August 31, 2012 and 2011, respectively. The decrease was due to less
promotion purposes to increase market awareness of the Company during the
three month period ended August 31, 2012.

Business Development expenses were $113,119 and $68,688 for the three month
periods ended August 31, 2012 and 2011, respectively. The increase was due to
additional travel expenses and attending more conventions during the three
month period ended August 31, 2012.

Consulting fees were $135,590 and $588,677 for the three month periods
ended August 31, 2012 and 2011, respectively. The decrease was due to the
Company not paying any stock based compensation to consultants during the
three month period ended August 31, 2012 as compared to $473,645 stock based
compensation issued to consultants during the three month period ended August
31, 2011.

Depreciation expense was $55 and $71 for the three month periods ended
August 31, 2012 and 2011, respectively.

Foreign exchange (gain) loss was ($161,934) and $87,965 for the three month
periods ended August 31, 2012 and 2011, respectively. The change being a gain
for the three month period ended August 31, 2012 compared to a loss for the
three month period ended August 31, 2011 was due to fluctuations in the USD
and CAD exchange rate and the translation of non-monetary assets.

Investor relations expenses were $67,399 and $157,149 for the three month
periods ended August 31, 2012 and 2011, respectively. The decrease was due to
a decrease in spending on investor relations activity during the three month
period ended August 31, 2012 as well as the Company decreasing its stock based
compensation payment to investor relations for the three month period ended
August 31, 2012 as compared to the three month period ended August 31, 2011.
The net effect was a decrease of $89,750.

Management fees were $166,043 and $48,863 for the three month periods ended
August 31, 2012 and 2011, respectively. The increase in management fees was
due to the overall increase in operating activities during the three month
period ended August 31, 2012.

24

Mineral property option payments and exploration costs were $2,558,018 and
$2,101,148 for the three month periods ended August 31, 2012 and 2011,
respectively. The increase was due to the Company incurring more option
payments and exploration costs during the three month period ended August 31,
2012 in both cash and stock based compensation.

Office and miscellaneous expenses were $17,720 and $9,258 for the three
month periods ended August 31, 2012 and 2011, respectively. The increase was
due to the increase in operating activities during the three month period
ended August 31, 2012.

Professional fees were $262,774 and $66,682 for the three month periods
ended August 31, 2012 and 2011, respectively. The increase was due to the
legal proceedings involving the Ringbolt Property and regulatory filings
resulting in increased professional fees during the three month period ended
August 31, 2012.

Transfer agent and filing fees were $16,855 and $26,695 for the three month
periods ended August 31, 2012 and 2011, respectively. The decrease was due to
a decrease in the services being provided by the transfer agent during the
three month period ended August 31, 2012.

Other Items

During the three month period ended August 31, 2012, our other
items accounted for $1,872,231 in income as compared to $4,094,898 in income for
the three month period ended August 31, 2011. The significant changes in other
items income (expenses) are outlined as follows:

Change in derivative liability was $1,749,229 and $4,094,898 for the three
month periods ended August 31, 2012 and 2011, respectively. The change in
derivative liability was due to a decrease in the fair value of the derivative
liability for the three month period ended August 31, 2012 as compared to the
three month period ended August 31, 2011.

Interest income was $10,334 and $Nil for the three month periods ended
August 31, 2012 and 2011, respectively. The increase was due to the Company
having more funds in short term interest bearing securities during the three
month period ended August 31, 2012.

Mineral property recovery was $112,668 and $Nil for the three month periods
ended August 31, 2012 and 2011, respectively. The increase was due to
reimbursement for previously incurred exploration costs from HNZ Potash, LLC
pursuant to the Joint Exploration Agreement HNZ Potash, LLC and the Company.

Net Income (Loss)

The net (loss) income was $(1,459,986) and $712,053 for the
three month periods ended August 31, 2012 and 2011, respectively. The decrease
in net income of $2,172,039 resulted primarily from the change in derivative
liability from $4,094,898 in the three month period ended August 31, 2011 to
$1,749,229 in the three month period ended August 31, 2012, which was further
reduced by an increase in business development expenses, management fees,
mineral property option payments and exploration costs, office and miscellaneous
expenses, and professional fees, which was offset by a decrease in
administration expenses, advertising expenses, consulting fees, foreign exchange
gain, investor relations fees, and transfer agent and filing fees.

Results of Operations for the six month periods ended
August 31, 2012 and 2011

Revenues

During the six month periods ended August 31, 2012 and 2011, we
did not generate any revenues.

Operating Expenses

Operating expenses incurred during the six month period ended
August 31, 2012 were $5,846,825 as compared to $7,714,481 during the six month
period ended August 31, 2011. Significant changes and expenditures are outlined
as follows:

Administration expenses were $26,092 and $54,925 for the six month periods
ended August 31, 2012 and 2011, respectively. The decrease in administration
expenses was mainly due to the Company not paying any stock based compensation
for administration during the six month period ended August 31, 2012 as
compared to $54,925 stock based compensation issued for administration during
the six month period ended August 31, 2011.

25

Advertising expenses were $345,944 and $357,359 for the six month periods
ended August 31, 2012 and 2011, respectively. The decrease was due to slightly
less promotion purposes to increase market awareness of the Company during the
six month period ended August 31, 2012.

Business Development expenses were $306,348 and $105,122 for the six month
periods ended August 31, 2012 and 2011, respectively. The increase was due to
additional travel expenses and attending more conventions during the six month
period ended August 31, 2012.

Consulting fees were $313,858 and $1,014,738 for the six month periods
ended August 31, 2012 and 2011, respectively. The decrease was due to the
Company not paying any stock based compensation to consultants during the six
month period ended August 31, 2012 as compared to $798,572 stock based
compensation issued to consultants during the six month period ended August
31, 2011, which was offset by the Company paying $97,692 more in cash to
consultants during the six month period ended August 31, 2012 as compared to
the six month period ended August 31, 2011.

Depreciation expense was $110 and $142 for the six month periods ended
August 31, 2012 and 2011, respectively.

Foreign exchange (gain) loss was $143,947 and $59,657 for the six month
periods ended August 31, 2012 and 2011, respectively. The change being a
smaller loss in 2011 than the loss in 2012 was due to fluctuations in the USD
and CAD exchange rate and the translation of non-monetary assets.

Investor relations expenses were $188,671 and $547,482 for the six month
periods ended August 31, 2012 and 2011, respectively. The decrease was due to
a decrease in spending on investor relations activity during the six month
period ended August 31, 2012 as well as the Company only paying $91,218 in
stock based compensation to investor relations during the six month period
ended August 31, 2012 as compared to $469,912 in stock based compensation
payment to investor relations during the six month period ended August 31,
2011, which was offset by the Company paying $19,883 more in cash to investor
relations during the six month period ended August 31, 2012 as compared to the
six month period ended August 31, 2011. The net effect was a decrease of
$358,811.

Management fees were $337,044 and $451,110 for the six month periods ended
August 31, 2012 and 2011, respectively. The decrease in management fees was
mainly due to the Company not paying any stock based compensation to
management during the six month period ended August 31, 2012 as compared to
$360,927 in stock based compensation to management during the six month period
ended August 31, 2011. The net effect was a decrease of $114,066.

Mineral property option payments and exploration costs were $3,794,043 and
$4,970,050 for the six month periods ended August 31, 2012 and 2011,
respectively. The decrease was due to the Company incurring less option
payments and exploration costs in both cash and stock based compensation
during the six month period ended August 31, 2012.

Office and miscellaneous expenses were $34,971 and $17,957 for the six
month periods ended August 31, 2012 and 2011, respectively. The increase was
due to the increase in operating activities during the six month period ended
August 31, 2012.

Professional fees were $336,499 and $88,610 for the six month periods ended
August 31, 2012 and 2011, respectively. The increase was due to an increase in
operating activities and regulatory filings as well as the legal proceedings
involving the Ringbolt Property resulting in increased professional fees
during the six month period ended August 31, 2012.

Transfer agent and filing fees were $19,298 and $47,329 for the six month
periods ended August 31, 2012 and 2011, respectively. The decrease was due to
a decrease in the services being provided by the transfer agent during the six
month period ended August 31, 2012.

Other Items

During the six month period ended August 31, 2012, our other
items accounted for $5,132,978 in income as compared to $12,160,684 in income
for the six month period ended August 31, 2011. The significant changes in other
items income (expenses) are outlined as follows:

26

Change in derivative liability was $4,995,782 and $12,160,684 for the six
month periods ended August 31, 2012 and 2011, respectively. The change in
derivative liability was due to a decrease in the fair value of the derivative
liability for the six month period ended August 31, 2012 as compared to the
six month period ended August 31, 2011.

Interest income was $24,528 and $Nil for the six month periods ended August
31, 2012 and 2011, respectively. The increase was due to the Company having
more funds in short term interest bearing securities during the six month
period ended August 31, 2012.

Mineral property recovery was $112,668 and $Nil for the six month periods
ended August 31, 2012 and 2011, respectively. The increase was due to
reimbursement for previously incurred exploration costs from HNZ Potash, LLC
pursuant to the Joint Exploration Agreement HNZ Potash, LLC and the Company.

Net Income (Loss)

The net (loss) income was $(713,847) and $4,446,203 for the six
month periods ended August 31, 2012 and 2011, respectively. The decrease in net
income of $5,160,050 resulted primarily from the change in derivative liability
from $12,160,684 in the six month period ended August 31, 2011 to $4,995,782 in
the six month period ended August 31, 2012, which was further reduced by an
increase in business development expenses, foreign exchange loss, office and
miscellaneous expenses, and professional fees, which was offset by a decrease in
administration expenses, advertising expenses, consulting fees, investor
relations fees, management fees, mineral property option payments and
exploration costs, and transfer agent and filing fees.

Liquidity and Capital Resources

Our financial statements have been prepared assuming that we
will continue as a going concern and, accordingly, do not include adjustments
relating to the recoverability and realization of assets and classification of
liabilities that might be necessary should we be unable to continue in
operation.

As at August 31, 2012, our current assets were $2,854,690 and
our current liabilities were $1,521,315 resulting in a working capital surplus
of $1,333,375. Our current assets as at August 31, 2012 consisted of cash and
cash equivalents of $2,796,378, receivables of $46,238 and prepaid expenses of
$12,074. Our current liabilities as at August 31, 2012 consisted of trade
payables and accrued liabilities of $325,211 and derivative liability of
$1,196,104.

During the six month period ended August 31, 2012, we raised
$176,976 from financing activities by stock issuances as compared to $822,139 in
the six month period ended August 31, 2011 for stock issuances. At August 31,
2012, we had an aggregate of 49,022,177 (February 29, 2012: 50,800,333) share
purchase warrants exercisable, between CAD$0.10 and CAD$0.35 per share, which
have the potential upon exercise to convert to approximately CAD$12,022,480 over
the next year. Further, as at August 31, 2012, a total of 16,699,392 (February
29, 2012: 16,474,392) stock options exercisable between CAD$0.10 and CAD$0.59
per share which have the potential upon exercise to generate a total of
approximately CAD$5,284,954 in cash over the next four years. There is no
assurance that these securities will be exercised.

Deficit accumulated since inception of exploration stage
increased to ($26,167,711) as at August 31, 2012 from ($25,453,864) as at
February 29, 2012.

Our plan of operations over the next twelve months is to focus
on the following:

Update our 43-101 Technical Report by the end of September 2012 at an
estimated cost of $3,054,832;

Complete a preliminary economic assessment or our properties by the end of
December 2012 at an estimated cost of $3,632,332;

Complete the acquisition of the Fitzgerald Ranch property on December 18,
2012, which requires a payment of $14,500,000;

Continue with the terms of the Ringbolt Option Agreement, which will
require exploration expenditures of $750,000 on the property on or before May
17, 2013;

Complete the acquisition of the Twin Buttes Ranch property which require a
payment of $1,000,000 on or before August 28, 2013 and a payment of
$19,000,000 on or before September 27, 2013.

Therefore, based on the above, we anticipate that we will
require a total of approximately $41,937,164 for our plan of operations over the
next twelve months. At August 31, 2012, we had cash of $2,796,378 and a working
capital surplus of $1,333,375.

27

During the next twelve months, we anticipate that we will not
generate any revenue. Accordingly, we will be required to obtain additional
equity financing in order to pursue our plan of operations for and beyond the
next twelve months. We are currently examining ways to finance our property
acquisitions and operations though equity and/or debt financings, but we
currently do not have any firm commitments for financing at this time. We cannot
provide investors with any assurance that we will be able to raise sufficient
funding from the sale of our common stock to fund our exploration programs and
property acquisitions going forward. In the absence of such financing, we will
not be able to continue our planned property acquisitions and possibly our
anticipated exploration programs and our business plan may fail. Even if we are
successful in obtaining financing to fund our planned exploration program, there
is no assurance that we will obtain the funding necessary to complete our
planned property acquisitions.

Statement of Cashflows

During the six month period ended August 31, 2012, our net cash
decreased by $5,802,632, which included net cash used in operating activities of
($5,429,608), net cash used in investing activities of ($550,000) and net cash
provided by financing activities of $176,976.

Cash Flow used in Operating Activities

Operating activities in the six months ended August 31, 2012
used cash of ($5,429,608) compared to ($5,118,750) in the six months ended
August 31, 2011. Significant changes in cash used in operating activities are
outlined as follows:

Loss was $713,847 compared to a profit of $4,446,203 in the six months
ended August 31, 2012 and 2011, respectively. The decrease in profit was
primarily a result of the decrease in the fair value of the derivative
liability and the decrease in mineral property option payments and exploration
costs.

The following non-cash items further adjusted the profit for
the six months ended August 31, 2012 and 2011:

Depreciation was $110 and $142 in the six months ended August 31, 2012 and
2011, respectively.

Fair value adjustment on warrants were ($4,995,782) and ($12,160,684) in
the six months ended August 31, 2012 and 2011, respectively. The decrease in
fair value adjustment on warrants was a result of the decrease in the fair
value of the derivative liability due to the passage of time, volume of
warrants and the decrease in the stock price of the Company.

Mineral property option payments and exploration costs were $317,531 and
$669,384 in the six months ended August 31, 2012 and 2011, respectively. The
decrease in non-cash mineral property option payments and exploration costs
was a result of the Company paying all such expenses during the six month
period ended August 31, 2012.

Stock-based compensation was $91,218 and $2,055,322 in the six months ended
August 31, 2012 and 2011, respectively. The decrease in stock-based
compensation was a result of there being no stock options granted during the
six month period ended August 31, 2012 and certain stock options vesting
during the six month period ended August 31, 2012, which were granted in the
fiscal year ended February 29, 2012.

The following changes in working capital items further adjusted
the profit for the six months ended August 31, 2012 and 2011:

Receivables were $837 and ($43,743) in the six months ended August 31,
2012 and 2011, respectively. The decrease in receivables was a result of the
cash receipts of previously accrued interest on investment securities.

Prepaid expenses were $67,763 and ($59,036) in the six months ended August
31, 2012 and 2011, respectively, due to a decrease by the Company in prepaid
expenses.

Trade payables and accrued liabilities were ($197,438) and ($26,338) in
the six months ended August 31, 2012 and 2011, respectively. The increase in
trade payables was due to delay in payment of accounts payable and accrued
liabilities.

Cash Flow used in Investing Activities

During the six month period ended August 31, 2012, investing
activities used cash of $550,000 compared to $20,623 during the six month period
ended August 31, 2011. The change in cash used in investing activities from the
six month period ended August 31, 2012 as compared to August 31, 2011 relates
primarily to significant acquisition costs of mineral properties of $300,000 and
long term deposits of $250,000.

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Cash Flow provided by Financing Activities

During the six month period ended August 31, 2012, we raised
$176,976 cash from financing activities as compared to $822,139 during the six
month period ended August 31, 2011 from proceeds on issuance of common shares 
net of share issue costs.

Off-balance sheet arrangements

There are no off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that is material to
investors.

Subsequent events

Subsequent to August 31, 2012, the Utah Court Grants the
Company Motion for Preliminary Injunction. The Company has deposited a bond in
the amount of $350,000 with the Court as security for the preliminary injunction
the Court will issue in favor of the Company.

Outstanding share data

At August 31, 2012, we had 172,751,863 issued and outstanding
common shares, 16,811,892 outstanding stock options at a weighted average
exercise price of CAD$0.31 per share, and 49,022,177 outstanding warrants at a
weighted average exercise price of CAD$0.25 per share.

Critical Accounting Policies

Our financial statements and accompanying notes have been
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis. The preparation of financial
statements in conformity with U.S. generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods.

We regularly evaluate the accounting policies and estimates
that we use to prepare our financial statements. In general, managements
estimates are based on historical experience, on information from third party
professionals, and on various other assumptions that are believed to be
reasonable under the facts and circumstances. Actual results could differ from
those estimates made by management.

We believe the following critical accounting policies require
us to make significant judgments and estimates in the preparation of our
consolidated financial statements.

Stock based compensation and derivative liability

We use the Black-Scholes Option Pricing Model to calculate the
fair value of stock based compensation and the fair value of the derivative
liability (the derivative liability consist of the fair value of warrants issued
in unit private placements for cash proceeds).

The estimation of the dividend yield, at this stage of the
Companys development, is not subject to significant uncertainty as its not
expected that the Company will commence paying dividends until it reaches the
production stage which is not in the near future.

The estimate of the expected life of the options and warrants
impacts both the stock price volatility and the estimated risk free interest
rate, as follows: the expected stock price volatility is calculated using
historical volatility going back the numbers of months equal to the estimated
expected life of the options and warrants and the risk free interest rate is
derived from the yield curve of a zero coupon government bond for a period equal
to the estimated expected life of the options and warrants.

Options and warrants, as a rule, are exercised when they are in
the money (when our stock price is in excess of the option and warrant exercise
price). There are various factors that influence our stock price that cannot be
estimated reliably, including: the state of the capital markets and our resulting access to
capital, the price of potash, the results of our exploration work and the
economic feasibility of our potash properties.

29

The estimation of the expected life is very difficult to
determine with accuracy. Any changes in the expected life of the warrants and
options will have a significant and material impact on the stock based
compensation expense, the change in derivative liability on the statement of
operations and the derivative liability on the balance sheet year end balance.

Recent Accounting Pronouncements

We have reviewed recently issued accounting pronouncements and
we plan to adopt those that are applicable to us. We do not expect the adoption
of these pronouncements to have a material impact on our financial position,
results of operations or cash flows.

Item 3. Quantitative and Qualitative
Disclosures About Market Risk

We are exposed in varying degrees to a variety of financial
instrument related risks. The Board of Directors approves and monitors the risk
management processes, inclusive of documented investment policies, counterparty
limits, and controlling and reporting structures. The type of risk exposure and
the way in which such exposure is managed is provided as follows:

Credit risk

Credit risk is the risk that one party to a financial
instrument will fail to discharge an obligation and cause the other party to
incur a financial loss. Our primary exposure to credit risk is on our cash and
cash equivalents. As most of our cash and cash equivalents are held by the same
bank there is a concentration of credit risk. This risk is managed by using a
major Canadian banks that are high credit quality financial institutions as
determined by rating agencies. Our secondary exposure to risk is on our other
receivables. This risk is minimal as receivables consist primarily of refundable
government goods and services taxes.

Liquidity risk

Liquidity risk is the risk that we will not be able to meet our
financial obligations as they become due. Our objective in managing liquidity
risk is to maintain sufficient readily available capital in order to meet our
liquidity requirements at any point in time. We achieve this by maintaining
sufficient cash and cash equivalents and raising capital through debt and/or
equity financing.

Historically, our sole source of funding has been the issuance
of equity securities for cash, primarily through private placements. Our access
to financing is always uncertain. There can be no assurance of continued access
to significant equity funding.

Foreign exchange risk

Foreign exchange risk is the risk that we will be subject to
foreign currency fluctuations in satisfying obligations related to our foreign
activities. We operate primarily in Canada and the United States and are
consequently exposed to foreign exchange risk arising from transactions
denominated in foreign currency. Fluctuations in foreign currency exchange rates
may affect our results of operations. We manage foreign exchange risk by closely
monitoring relevant exchange rates and when possible, executes currency exchange
transactions at times when exchange rates are most advantageous for us. We do
not use hedging to manage its foreign exchange risk.

Interest rate risk

Interest rate risk is the risk that the fair value of future
cash flows of a financial instrument will fluctuate because of changes in market
interest rates. We are exposed to interest rate risk on our cash equivalents as
these instruments have original maturities of three months or less and are
therefore exposed to interest rate fluctuations on renewal.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are
designed to ensure that information required to be disclosed in our reports
filed under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified in the
SECs rules and forms, and that such information is accumulated and communicated
to our management, including our Chief Executive Officer, Joshua Bleak
(being our principal executive officer), and our Chief Financial Officer, Laara
Shaffer (being our principal financial and accounting officer), to allow for
timely decisions regarding required disclosure. Our Chief Executive Officer and
our Chief Financial Officer are responsible for establishing and maintaining
disclosure controls and procedures for our Company.

30

Our management has evaluated the effectiveness of our
disclosure controls and procedures as of August 31, 2012 (under the supervision
and with the participation of the Chief Executive Officer and the Chief
Financial Officer), pursuant to Rule 13a-15(b) promulgated under the Securities
Exchange Act of 1934, as amended. As part of such evaluation, management
considered the matters discussed below relating to internal control over
financial reporting. Based on this evaluation, our Companys Chief Executive
Officer and Chief Financial Officer have concluded that our Companys disclosure
controls and procedures were not effective as of August 31, 2012.

Changes in Internal Control over Financial Reporting

The term internal control over financial reporting is defined
as a process designed by, or under the supervision of, the registrants
principal executive and principal financial officers, or persons performing
similar functions, and effected by the registrants board of directors,
management and other personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles and includes those policies and procedures that:

pertain to the maintenance of records that in reasonable detail accurately
and fairly reflect the transactions and dispositions of the assets of the
registrant;

provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the
registrant are being made only in accordance with authorizations of management
and directors of the registrant; and

provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the registrants assets that
could have a material effect on the financial statements.

A material weakness is defined in Public Company Accounting
Oversight Board Auditing Standard No. 5 as a significant deficiency, or a
combination of significant deficiencies, in internal control over financial
reporting that results in there being more than a remote likelihood that a
material misstatement of the annual or interim financial statements will not be
prevented or detected.

There have not been any changes in our internal control over
financial reporting that occurred during our fiscal quarter ended August 31,
2012 that have materially affected, or are likely to materially affect, our
internal control over financial reporting.

PART II  OTHER INFORMATION

Item 1. Legal Proceedings

Except as set forth below, management is not aware of any legal
proceedings contemplated by any governmental authority or any other party
involving us or our properties. As of the date of this Quarterly Report, no
director, officer or affiliate is a party adverse to us in any legal proceeding,
or has an adverse interest to us in any legal proceedings.

On May 18, 2012, we delivered a letter to North American Potash
Developments Inc. (formerly Ringbolt Ventures Ltd.), Potash Green, LLC, Wendy
Walker Tibbetts and Joseph J. Hansen (collectively, the Optionor), informing
them that they were in breach of the Ringbolt Option Agreement by the Optionor
not granting operational control of the Potash Green exploration permits by
signing a limited Power of Attorney as requested by us and that the payment of
cash and shares that were due by us to the Optionor on May 17, 2012 would not be
paid until the Optionor cured the defaults delineated in the default letter.

On May 25, 2012, we were informed by the Optionor that it had
filed a civil action in Third Judicial District court, Salt Lake County, State
of Utah alleging that we failed to make payment to the Optionor in the amount of
$350,000 or deliver to Optionor 1,400,000 shares of our common stock on May 17,
2012 as required pursuant to the Ringbolt Option Agreement, and that we did not
provide a timely or proper written report as required pursuant to the Ringbolt
Option Agreement. In addition, the Optionor alleges that we have failed to
reimburse the Optionor for $20,715.80 in expenses paid by the Optionor to
maintain certain leases that are the subject of the Ringbolt Option
Agreement. In its claim under the first cause of action for breach of contract,
the Optionor is seeking payment of $350,000 and 1,400,000 shares of our common
stock, or alternatively $644,000 in total damages, plus interest, costs and
attorney fees, as allowed by law. In its second cause of action for unjust
enrichment, the Optionor is seeking no less than $20,715.80, plus interest,
costs, and attorney fees, as allowed by law. With respect to the second cause of
action, we take the position that such expenses were due prior to the
transaction receiving TSX Venture Exchange approval as required in accordance
with the Ringbolt Option Agreement, and therefore, such payments were the
responsibility of Optionor.

31

On June 19, 2012, we filed an answer and counterclaim to the
Ringbolt civil action and tendered to the Utah court the $350,000 in cash and
the 1,400,000 shares which were due pursuant to the Ringbolt Option Agreement on
May 17, 2012, pending a ruling by the court on the sufficiency of tender. The
court ruled that the tender to the court was not sufficient, therefore, the cash
and shares were released to Optionor on July 10, 2012.

On September 10, 2012, we announced that the court had granted
our motion for a preliminary injunction, which enjoined Optionor from
terminating the Ringbolt Option Agreement based upon the grounds alleged by
Optionor. We intend to continue to vigorously defend our rights in the Ringbolt
Option Agreement should the case proceed to trial.

Item 1A. Risk Factors

We are a smaller reporting company as defined by Rule 12b-2 of
the Exchange Act and are not required to provide the information required under
this item.

Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds

On June 4, 2012, we issued 250,000 shares to Southwest
Exploration, Inc. as partial payment pursuant to the Southwest Option Agreement.
We relied on exemptions from registration under the Securities Act of 1933, as
amended, provided by Rule 506 of Regulation D and/or Section 4(a)(2) for the
issuance of such securities.

On June 7, 2012, we issued an aggregate of 1,400,000 shares the
two individuals and one entity pursuant to the Ringbolt Option Agreement. We
relied on exemptions from registration under the Securities Act of 1933, as
amended, provided by Rule 506 of Regulation D and/or Section 4(a)(2) for the
issuance of such securities.

On June 27 and 28, 2012, we issued an aggregate of 1,778,156
shares to three individuals and one entity pursuant to the exercise of common
share purchase warrants at an exercise price of CAD$0.10 per share for total
proceeds of $176,976. We relied on exemptions from registration under the
Securities Act of 1933, as amended, provided by Rule 506 of Regulation D and/or
Section 4(a)(2) for U.S. purchasers as well as Regulation S for Canadian
purchasers.